Retirement in Sight – February 2016

retirement ahead_2


Assume you will live to be 90. It could happen: the Social Security Administration thinks that about 25% of today’s 65-year-olds will live to age 90 or longer. Will your savings be able to last that long?1

As T. Rowe Price’s retirement calculator indicates, if you retire at 65 with $500,000 in retirement savings split between equities and bonds, there is about an 80% chance that your savings will last until age 95 if you draw them down by $20,000 (or its inflation-adjusted equivalent) annually. If you move from that 4% yearly withdrawal rate to a 5% annual withdrawal rate (initial withdrawal of $25,000, then gradually adjusted upward), the odds of outliving your money in 30 years rise to 50%. If you start with a 3.5% annual distribution ($17,500) from those savings, then the chance of outliving your money by age 95 shrinks to about 10%, even with the distribution increasing in light of consumer prices.2

If you retire at 70 (which could be unlikely), then that $500,000 in savings would have about a 90% chance of lasting 25 years using an inflation-adjusted 4% withdrawal rate under the above conditions. (As for the invested savings, T. Rowe Price assumes annual returns of 4.9% for equities, 2.2% for bonds, and 1.4% for short-term bonds.) These are very basic calculations, not a guide by any means,  but they do provide food for thought about what we can live on annually in retirement in addition to Social Security and other potential income sources.2,3


Retirees who want to live in warmer climes for part of the year need to consider some monetary factors before starting out. Property upkeep, for one – Sun Belt homes have lawns and landscaping that grow year-round. Taxes, for another – what do you have to do to qualify for residency in a state with a more favorable tax code?

You should make documents pertaining to your northern residence and your southern retreat (or your RV) easy to find, anywhere and anytime. The cost of utilities, association fees, and travel may make snowbirding less attractive. It can be fun, but you may want to “rent” the experience before you “buy” it.4


The S&P 500 is facing some sizable headwinds in the opening quarter of 2016, but its long-term performance affirms the value of time in the market rather than trying to time the market. In 39 of the past 50 years, the index has advanced.5

Kent Butcher may be reached at 918-747-5585 or



This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.

1 – [2/10/16]

2 – [2/10/16]

3 – [2/10/16]

4 – [12/31/15]

5 – [1/19/16]

6 – [7/12/12]


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